In an exclusive interview, Sir Peter Gershon, whose name is synonymous with the 2004 review, talks to Michael Burton about the new pressures for more efficiency and transformational government.

Efficiency is back in the political arena and the pressure is on for more savings, says the businessman and former Whitehall chief whose name is a shorthand for the biggest public sector efficiency review ever to take place in England.

Sir Peter Gershon said: ‘We're seeing efficiency come back into public debate in a way it was in 2004, because of the macro-economic environment' and the impact of an approaching election.

But, he equally believes the public sector still has plenty of scope for more efficiency gains, although they will demand much greater organisational change, and he cites simplifying the ‘extremely complex' delivery chain from Whitehall down to town hall as an example.

In a wide-ranging interview last week with The MJ from his Mayfair offices, where he is non-executive chairman of Premier Farnell, Sir Peter talked about new pressures to bring in efficiencies and the impact of his own review. He is also speaking this week at the SOLACE conference in a panel workshop hosted by The MJ and Vertex, the business services firm where is a non-executive director.

The efficiency agenda is firmly back on the political agenda. Liberal Democrat leader, Nick Clegg, claimed at his conference last month that Whitehall cuts would fund his party's spending plans. Shadow chancellor, George Osborne, last week pledged a Conservative Government would bring in a council tax freeze funded by Whitehall savings.

Even ministers themselves have warned rising costs must be met by efficiency gains. While insisting there will be no more money for councils grappling with inflationary rises in fuel and overheads but also emphasising they do they expect cuts in services, ministers say rising costs must, therefore, be covered by further efficiency savings. The latest efficiency figures produced last week in councils' annual efficiency statements show they have met their targets and more. So where next can they go?

Sir Peter replies: ‘There is still scope for significant efficiencies in the public sector. If you look at the gains during SR04 [spending review period 2004/07] they were about issues such as better procurement. But the significant gains from now on will be made through the re-engineering of business processes. This is much harder and you tend to do that after the easy stuff. BPR isn't the norm in the public sector the way it is in the private sector.'

The Gershon review took place five years ago, when in August 2003, Sir Peter was asked by Tony Blair and Gordon Brown, conscious that rising public spending faced leaner times during the next CSR 2004/07 period, to seek out ways of bringing in efficiencies. There had been previous reviews under Margaret Thatcher, but none so comprehensive or, as Sir Peter puts it, ‘holistic.'

Inevitably, there was a political dimension, with a general election looming in 2005 and the main political parties claiming there was fat on the public sector bone to be cut. The review also followed a period of above-inflation investment in public services, and a realisation that the party was coming to an end. At the same time, a Labour Government did not want to undo its work in improving public services. The mantra was savings without cuts in frontline services. Sir Peter recalls the brief was clear, that this was not about ‘slash and burn.' He adds: ‘The PM and chancellor did not want the efficiency review undermining their public service agenda.'

Asked if he made a difference, Sir Peter replies tactfully: ‘What makes a difference is what happens in the implementation phase. The public sector organisations are at different stages on the journey. Some have found it easier, others haven't yet left the station.'

But, overall, he agrees that his review, unlike others which come to mind, has been taken on board. ‘The public sector wouldn't have the level of capability it has, had there been no Gershon review or holistic focus on efficiency.

‘The spirit of what I proposed has been successfully implemented, although clearly there is an ongoing debate about how to validate efficiency gains. I always believed the efficiency agenda was about trying to create a foundation on which the Government could build after SR04, and it's clear that SR07 does indeed build on this.'

Asked if he believes efficiency is ‘deep in the DNA of the public sector' he replies: ‘It still doesn't have sufficient momentum.' But, he is generally upbeat about local government's achievements, saying: ‘Local government HR, for example, on average, was better than central government. But local authorities, police bodies and sectors with autonomous bodies were diverse.'

He adds: ‘One body could be the best in class and the geographically adjacent body the worst. There was no diffusion of best practice across narrow geographical boundaries. That's a big challenge, to accelerate this diffusion of best practice across local government, police and fire services. In Whitehall, no departments were good at everything but they were good at some things and not others.'

He does, however, credit local government's efficiency at least partly to CPA. ‘There's no hiding place because of CPA. Getting agreement with the Audit Commission to include efficiency in this was a significant aspect of the review. It made it harder to create efficiency just in isolation. And CPA has shown you can improve services, even while making efficiencies.'
He even takes local government's side when the National Audit Office was sceptical about councils' efficiency claims. ‘It was unfortunate the NAO and Audit Commission were unable to agree about the validity of efficiency claims made by local government, and the NAO continues to raise questions over CPA claims. The Government has a ringside seat watching two public bodies disagree.'

Asked if the NAO was being unfair, he replies carefully: ‘The NAO was erring towards being purist.'

However, he is less convinced the CPA's successor, the CAA, will carry on this process. ‘I hope the momentum will carry on, but I have some concerns as to whether the CAA will have an integrated approach. I'm not 100% convinced it will.'

Sir Peter's 35-year career has spanned both private and public sectors, including a period as the first chief executive of the OGC. Although he has been back in the private sector since his 2004 review, he says: ‘I take a keen interest in the subject. I gave a year of my life to the review, and I've a great interest in seeing how it develops.'